Virgin Money lines up Ross to fund RBS deal

Sir Richard Branson has signed up billionaire American Wilbur Ross to bankroll Virgin Money's expansion into banking - starting with a bid for Royal Bank of Scotland's bank branches.

RBS has set a deadline of tomorrow for the first round indicative bids for the 318 branches it must sell as part of European Union conditions in return for receiving a government bail-out.

Virgin Money, Spain's Santander, National Australia Bank and Spain's BBVA are all expected to put in serious proposals, sources say, with the eventual sale price likely to be around £2billion.

Virgin Money has persuaded Ross to invest at least £500million if
needed to
fund

the RBS offer. However it is also keen to sign up other potential
investors including private equity firms. JC Flowers and Blackstone may
be contenders.

Ross has also agreed to spend a further £100million to buy a
21per cent stake
in Virgin Money from Branson, who currently owns 100 per cent of the
business.

James Lockhart, vice chairman of WL Ross, will join the Virgin
Money board. Branson is still looking for a new chairman after Sir Brian
Pitman died last month. The £100million would help finance the cost of
rolling out Virgin-branded high street bank branches.

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But Branson knows organic expansion won't be sufficient to enable
Virgin to become a force on the high street. He is prepared to dilute
his ownership to bring in partners to help finance acquisitions.

Virgin Money is also keen on Northern Rock's 'good bank' and
branches.

However, UKFI which manages the government-owned Rock, is
reluctant to enter into an early sale and wants to knock the bank into
shape first.

RBS, meanwhile, is eager to sell its branches by the summer, as
it has a series of other disposals to make.

The 318 branches will be sold along with the defunct Williams
& Glyn's brand, so a new entrant could use the established name.
They currently trade as RBS in England and Wales and NatWest in
Scotland.

Acquiring the branches would give any buyer the equivalent of a
2 per cent share in consumer banking, a 5pc share in small business banking,
and a 5 per cent share in mid-sized corporate banking, with more than £22billion in
deposits.

- Gordon Pell, who retired from the board of Royal Bank of
Scotland this month with a £13.6million pension pot, has been controversially
re-hired by the bank as deputy chairman of Coutts.

He was the last remaining senior executive from the old
regime under Sir Fred Goodwin which led the bank to near-collapse
through its ill-fated acquisition of ABN Amro.

While Goodwin was forced to accept a lower pension, Pell
walked away with a gold-plated retirement plan worth £582,000 a year.

He only stepped down at the end of March, however it now
emerges he has been signed up to work part-time at Coutts - RBS's brand
for the rich and famous.